Long-Term Prospects for Gold and Silver Unchanged

The following is a summary of our recent podcast interview with CPM Group’s Jeff Christian.

Gold and silver have been getting slammed for weeks but Jeff Christian, one of the world’s leading precious metals analysts, thinks this is more of a short-term reaction to subsiding geopolitical fears and reiterates his long-term bullish outlook based on a number of fundamental drivers.

Recent Weakness Is Short-term

In early April, the price of gold was roughly $1,250 an ounce, he noted, as the US bombed a Syrian airbase and the Trump administration made a statement about sending an aircraft carrier group off of the Korean peninsula.

This saber rattling dovetailed with concerns about populist French presidential candidate Marine Le Pen possibly taking the lead in the French elections. Now, with Emmanuel Macron’s defeat of Le Pen, fears over a further break-up of the European Union have subsided and the demand for gold has weakened.

“There was a tremendous amount of political uncertainty and risk,” Christian noted. “In that environment, the price of gold went from $1,250 to $1,297 over about a two-week period. Then it came back off. … I think what we’re seeing is not a massive move away from gold but a very short-term (reaction).”

In terms of silver’s large decline, here’s a brief clip of what he had to say when it comes to silver’s use in solar panels and how that’s affecting the silver market:

Near-Term Outlook

More generally, Christian sees positives for gold later this year and going forward. The big driver – as Jeff has argued strongly for years – is investment demand, which is heavily influenced by economic conditions, financial market trends, and political uncertainties.

When we spoke to Christian on our podcast at the beginning of this year in January, he forecasted that metals would end up mostly flat for the first half of 2017. Given the selloff in recent weeks, silver is now up around 1-2% year-to-date, giving up most of its gains for the year, and gold is up around 5-6% – still positive though well off its double-digit gains into mid-April.

At this point, Christian believes “as the year progresses, people will become more concerned about governance (and) the US economy” and, by the end of 2017, called for gold to trade firmly above $1,300.

Long-Term Outlook

In 2009, Christian was arguing that gold and precious metals were approaching a cyclical peak in a secular bull market. He predicated a peak might be made in 2011, and then prices might fall for 3 to 5 years before the secular bull market reemerged.

“Our long-term view has been and continues to be that the (gold) price rises relatively modestly in 2017,” Christian said. “It has the potential to accelerate a little bit in 2018, but really beyond 2018, we expect another recession to emerge in the United States, possibly in 2018 or 2019.”

Beyond that timeframe, however, he is very pessimistic about US debt and other long-term economic and financial market trends. If President Trump has his way, instead of seeing $400 billion dollar deficits, Christian noted, the Congressional Budget Office estimates we may see deficits at $1.4 trillion annually on a sustained basis.